How to make 1M from 5K in a year

A big success consists of small steps. Let me show you how to use math to kick our butts to do something everyday and move towards ambitious results (because this is how the probability theory and luck work).

Anastasia Green asked on Facebook how to make $1M from $5K in a year. Majority of people on the earth would find this task absolutely unrealistic, were they given it and the money in real life. But from the math perspective it is surprisingly simple.

Solution #1

Using the compound interest formula 

A=P(1+R)^n (A = $1M, P=$5K, n=365) 

your R will be less than 1.5%.

This means that you need to find something that will let you grow your capital at the steady rate of 1.5% per day and keep doing it for 365 days.

For example, you can launch a startup that will increase sales by 1.5% per day, which doesn't sound so unreal, right? (It’s much more frightening to think about a 20,000% increase in a year timeframe.)

But life makes math so much more complicated. Add risks like wrong choices, lack of knowledge, skills and luck, unexpected events that force people to change their preferences and spend money on toilet paper and Zoom, instead of paying for innovative products you just invented to make their lives so much better, were they not only interested in online drinking parties and courses on how to play the ukulele (one of the top-rated courses on Udemy during the pandemic). 

Solution #2

Let’s say you have insider information about a promising startup, or your expertise allows you to recognize a team with a good potential. Then statistically the best approach would be to:

1. find a fast-growing startup that just raised Series A or B from top VC - you can find them all on Crunchbase,
2. find their open positions on LinkedIn,
3. use your skills to get hired, even with a serious cut on salary,
4. negotiate a good stock benefit with Employee Stock Options Plan (let's assume $100K in stock for the first year),
5. the chance your stock option grow 10x in 1 year is more than 60% (if you pick one of the good companies),
6. use your $5,000 to buy bananas and peanut butter for the whole year (they will help you survive without sacrificing your health too much).

Or play on the stock market with a return of 1.5% per day by reinvesting all capital.

***

And here we are down to 3 approaches:

1) grow sales of something you have by 1.5% per day,

2) find a company that will grow at 1.5% rate per day and ride on their success (via stock options),

3) find me a great $100M deal and take a 1% introductory fee.

Anyone who can achieve it not once, but several times and prove they can be called a guru, should write a book “How to turn $5,000 into $1,000,000 in 365 days” and make even more money selling it.

But on a serious note, this example demonstrates a few simple truths in entrepreneurial life:

• To achieve a big goal you should not sit there looking at it frightened and petrified, but break it down into small doable steps and work on making the successful ones consistent. What seems so small at the moment makes a huge difference at the end.
• Do something every day if you want to achieve something. Even if you feel low, even if your battery is dead, find something you can do anyway be it writing emails or arranging meetings for the next week.
• Be flexible and experiment with the concepts, trying new ones and adjusting those not working well enough. Don't get too attached to them, don’t give up too soon. Usually a 2-week timeframe is enough to verify any concept. Lack of luck in many cases is lack of statistically significant attempts. Slowly you will become an expert in the chosen area and will become successful.

These steps may not take you to a million in a year, but they will definitely make ambitious goals more achievable.